Entry Mode Choice: A Meta-Analysis of Antecedents and Outcomes.
| Verfasser | Wan, Chenxi |
1 Introduction
A growing number of multinational enterprises (MNEs) are attracted by the opportunities and resources of international markets. In this context, choosing a suitable entry mode into a foreign market is a key decision for MNEs (Giachetti et al., 2019). The entry mode is closely related to an MNE's operations, growth and performance (Buckley, 2004; Delios & Beamish, 1999; Morschett et al., 2010). However, due to unfamiliarity with the markets and the additional burden imposed by operating in foreign markets (Kao & Kuo, 2017; Tihanyi et al., 2005), making entry mode decisions is challenging. Therefore, it is paramount to understand and explore the antecedents and outcomes of entry mode choices for MNEs. Entry modes have been described as a critical part of the international operations of MNEs. The ownership mode choice refers to 'the level of equity ownership determined in a foreign subsidiary' (i.e. wholly-owned subsidiary [WOS] or joint venture [JV]), while the establishment mode choice refers to 'MNEs acquiring an existing enterprise or building a new startup' (i.e. acquisition or greenfield) (Arslan et al., 2015, p. 997). Regarding their differences, Dikova and van Witteloostuijn (2007) advocated that the two entry mode choices cover different aspects of MNEs' foreign direct investment (FDI) decisions. The ownership mode choice refers to the control level the MNE wants to exert, while the establishment mode choice focuses on the combination of local assets with the ones already owned by the MNE (Dikova & van Witteloostuijn, 2007).
Increased attention has been given to the antecedents and outcomes of entry mode choices in recent decades. Regarding the antecedents of entry mode choices, scholars have tested myriad external factors (e.g. cultural distance and political factors) and internal factors (e.g. firm resources and technologies), all of which affect entry mode choices (Laufs & Schwens, 2014; Meyer et al., 2009). Previous qualitative reviews exploring entry mode choices have listed theoretical models and frameworks (e.g. De Villa et al., 2015; Surdu & Mellahi, 2016), identified antecedents (e.g. Laufs & Schwens, 2014; Meyer et al., 2009) and proposed future research directions (e.g. Brouthers, 2013; Javalgi et al., 2011).
However, the qualitative reviews have not been able to explain the inconsistencies among empirical results. These studies have failed to provide clear guidance for researchers' and managers' decision-making processes because they cannot statistically combine conflicting results from individual empirical studies (Geyskens et al., 2006). These conflicting results pose substantial difficulties for both academic research and foreign entry decisions. To reconcile these conflicting results, some scholars have used quantitative meta-analyses to test some propositions (Cooper & Hedges, 1994). These meta-analytical reviews allow for the quantitative integration of existing results (Kirca & Yaprak, 2010; Tan & Sousa, 2013) and provide a better understanding of the current empirical research.
Although the existing meta-analyses have reported some significant results, a comprehensive review of the entry mode choice is still timely and important (Surdu & Mellahi, 2016). A theoretical framework that combines the antecedents and outcomes of entry modes is still needed for four reasons. First, the existing meta-analyses have not combined the effects of the antecedents on the ownership mode and the establishment mode and their effects on the outcomes in one single framework. As two of the most frequently examined entry modes, the ownership mode choice and the establishment mode choice are regarded as two decisions that are made together before international entry (Arslan et al., 2015; Dikova & van Witteloostuijn, 2007). Therefore, the antecedents, ownership mode choice, establishment mode choice and their outcomes should be examined together. This review combines transaction cost economics (TCE) and the resource-based view (RBV) to explain the decision process. This provides a significant departure from the previous meta-analyses, as they did not explain the entry mode choices, their antecedents and outcomes under one framework.
Second, the existing studies have only examined a small subset of factors such as parent-firm characteristics and home-host country differences based on a specific theoretical lens (e.g., TCE, RBV); as a result, the effects of many other antecedents remain unclear. By combining the notions of TCE and RBV in one single framework, this review investigates four groups of antecedents (i.e., parent-firm characteristics, host country characteristics, parent - foreign affiliate differences, and home host country differences). Moreover, the empirical studies have largely failed to test the different effects on various entry mode choices (i.e. ownership mode choice and establishment mode choice).
Third, the differences in the outcomes of the entry mode choices still need to be addressed by researchers. MNEs have different goals when they launch their international operations, and the post-entry outcomes are important indicators for evaluating the appropriateness of an entry mode for achieving those goals. The existing meta-analyses on the entry mode - outcome relationship have analysed how the ownership mode choice affects the outcomes (e.g. Giachetti et al., 2019; Zhao et al., 2017). However, the effects of the establishment mode choice on the outcomes have largely been ignored. As a result, the current studies provide insufficient guidance on the post-entry outcomes for making entry mode choices.
Fourth, different entry modes entail different levels of organisational control, risk exposure, resource requirements and expectations of future returns (Tang & Buckley, 2020). All these characteristics are closely related to firms' outcomes, which means that the antecedents can influence the outcomes by affecting the entry mode choices. Entry mode choices are regarded as an exogenous random selection when evaluating performance in most existing studies (Brouthers, 2002), while the determinants of the entry mode choices are essential in analysing the outcomes (Papyrina, 2007). Though some empirical studies have solved this problem by testing the fitness of the entry modes, it is still unclear how specific antecedents affect the outcomes through the entry mode choices. Despite acknowledging the importance of indirect effects (Zhao et al., 2017), the existing meta-analyses have failed to explain the mediation role of entry mode choice between antecedents and outcomes.
To address the knowledge gaps discussed above, this paper conducts a comprehensive review of the entry mode choices, including their antecedents and outcomes, and contributes to entry mode research in four ways. First, this meta-analysis extends the existing knowledge by reconciling the inconsistent results from previous studies by including the antecedents, ownership and establishment mode choices and outcomes in one single framework. Our study draws upon TCE and the RBV to analyse the effects of the antecedents on the entry mode choices and their outcomes.
Second, this meta-analysis extends the understanding of entry mode choices by examining the effects of more antecedents (15 antecedents) and comparing two entry mode choices rather than one (i.e. ownership mode choice and establishment mode choice). The ownership mode choice and establishment mode choice are two decisions that are made together before international entry (Arslan et aL, 2015; Dikova & van Witteloostuijn, 2007). How the antecedents affect the two choices in different ways has not been discussed thoroughly. The inclusion of these additional antecedents allows the classification of these variables into several groups (i.e. parent-firm characteristics, host-country characteristics, parent - foreign affiliate differences and home - host country differences), thereby linking more clearly the entry mode choice and the antecedents. Moreover, this meta-analysis highlights the importance of examining the two choices together and extends the current research by showing which antecedents affect the two choices.
Third, this paper analyses the relationships between the establishment mode choice and different post-entry outcomes (i.e. performance and survival), which have been largely ignored in previous meta-analyses. Performance focuses on the success of an MNE in the international market, while survival evaluates the longevity of the MNE's subsidiaries (Delios & Beamish, 2001). By testing and comparing different post-entry outcomes in relation to the establishment mode choice, this paper explores the entry mode choice through a more complete model. Since all the antecedents and post-entry outcomes are examined together, the paper provides a more comprehensive and integrative model after testing and comparing all possible models (Bergh et al., 2016). This expands the understanding of making entry mode choices from the antecedents to the post-entry outcomes.
Fourth, this paper explores the 'black box' in international entry by examining whether the entry mode choice works as a mediator between the antecedents and the post-entry outcomes. The black box refers to the mechanism through which antecedents affect post-entry outcomes. This paper combines two current streams of research (antecedents on entry mode choices and entry mode choices on outcomes) with meta-analytic structural equation modelling (MASEM) to analyse the mediating effects of entry mode choices and examine the mediating paths from the antecedents to the outcomes. The examination contributes to the understanding of international entry by explaining what effects the antecedents will have on the outcomes with different entry modes. Thus, the analysis enhances the comprehension of the entry mode choice mechanism and explains how the antecedents affect the outcomes through the entry mode...
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